The Australian dollar was amongst the strongest major currencies in the last quarter of 2020 and has begun 2021 in a similar fashion. Economists at CIBC Capital Markets look for further strength in the AUD/USD pair amidst a broadly weaker USD and economic recoveries.
Key quotes
“From present levels, we target further gains in AUD/USD, to 0.7850 in Q1.”
“A rebound in domestic economic activity, underpinned by accommodative monetary policy, was a strong driver of AUD strength to date. We anticipate that support to continue.”
“The apparent shrugging off of trade tensions between Australia and China is notable, as there remains a clear sense of market caution over a situation that generates plenty of headlines. The significance being, that should some resolution be found, or tension itself calm, we would anticipate a positive response in AUD.”
“On trade, the contribution of iron ore cannot be dismissed, any talk of that market between Australia and China would be concerning. Unless that is the case, we remain bullish and buyers of AUD weakness.”
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